Title: Pão de Açúcar: Navigating Challenges Towards Growth and Restructuring
Introduction:
In a recent report published by the Bank of America (BofA), Brazilian company Pão de Açúcar experienced a nearly 7% drop in its shares. Despite this setback, Marcelo Pimentel, the company’s general director, remains confident in its growth potential. Pimentel emphasizes the need to focus on improving operations, reducing leverage, and restructuring capital. As Pão de Açúcar undergoes changes, it aims to create value for shareholders and strengthen its position in the market.
1. Overcoming Setbacks and Maintaining Focus:
– Pão de Açúcar’s shares fell 7% following BofA’s report, but it does not deter the company’s focus on its core strategies.
– Marcelo Pimentel believes in the company’s growth potential and the importance of improving operations, reducing leverage, and restructuring capital.
– The target price by BofA was reduced due to the adaptation to the new reality of the Êxito spin-off, resulting in analysts adjusting the company’s valuation.
2. Addressing Capital Structure and Shareholder Value:
– The split of Êxito shares affected the target price set by BofA, but Pimentel asserts that it created value for shareholders during that time.
– Pão de Açúcar’s current share price does not align with BofA’s target price, according to Pimentel, highlighting the ongoing restructuring efforts to improve prices for shareholders.
– The company’s focus on improving the business is not solely driven by the intention of selling Casino’s stake but rather to strengthen the overall operations.
3. Becoming a Premium Merchant:
– Pão de Açúcar aims to reestablish itself as a “premium merchant” by focusing on improving its value proposition for suppliers and customers.
– The company’s efforts have resulted in increased sales volume and market share growth, despite the challenging retail environment impacted by food price deflation.
– Suppliers are once again launching their products in Pão de Açúcar stores, reflecting the positive response to the company’s value proposition.
4. Avoiding Short-Term Market Pressures:
– Marcelo Pimentel cautions against reacting to short-term market pressures, which could lead to loss of focus and potentially hinder long-term growth.
– He encourages maintaining a strong brand and capitalizing on the captive market to ensure shareholder value continues to increase.
– Pão de Açúcar’s share price is a reflection of its ongoing efforts and should not overshadow the company’s overall progress.
Conclusion:
Pão de Açúcar faces challenges as it navigates through restructuring its operations, reducing leverage, and improving its capital structure. Despite a recent drop in share price, the company’s general director remains confident in its growth potential. By focusing on its value proposition and maintaining a strong brand, Pão de Açúcar aims to create value for shareholders and bolster its position as a premium merchant in the Brazilian market.
Summary:
Pão de Açúcar’s shares experienced a significant decline after the Bank of America reduced its target price. However, the company’s general director, Marcelo Pimentel, remains optimistic about its growth potential. Pimentel emphasizes the need to improve operations, reduce leverage, and restructure capital. He believes that the key to success lies in maintaining focus and not succumbing to short-term market pressures. By strengthening its value proposition and capitalizing on market opportunities, Pão de Açúcar aims to create value for shareholders and achieve long-term growth.
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The day was not easy for Pão de Açúcar, which saw its shares fall almost 7% in reaction to a report published by Bank of America (BofA). But, for the company’s general director, Marcelo Pimentel, these types of setbacks should not divert the company from its focus: improving operations, reducing leverage and, in parallel, restructuring its capital. “I believe and see enormous growth potential for Pão de Açúcar,” said Pimentel, in a brief interview after his participation in the event promoted by the Brazilian Supermarket Association (Abras) in Campinas, in the interior of São Paulo. .
The BofA reduced the target price of Pão de Açúcar from R$ 15.00 to R$ 3.50, partly due to the adaptation to the new reality of the role from the Êxito spin-off. The report also points out that the operational advances made by the company are not sufficient to avoid pressure on results.
Pimentel explains that the change in BofA’s target price mainly includes the “split” of Êxito shares. He remembers that, when the operation was carried out, Pão’s shares rose to R$4.90 and those of Êxito reached R$15.00. “In that movement we create value for shareholders,” he says. Once this effect has been corrected, analysts are adjusting the valuation of the company, whose share closed today’s session just above R$ 4.00. The executive states, however, that he does not agree with the new price level indicated by BofA analysts, of R$3.50. And the restructuring that he has led since he took over the company, in 2022, will mean an improvement in prices for shareholders.
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“We are going through a moment of transition. On our part, it is an absolute focus on what we committed to do operationally and on reducing leverage,” she says. It refers to improving image, reducing expenses and increasing sales, which has already translated into market share growth in the last five quarters.
“In parallel, the issue of capital structure is being addressed, but the operation is beginning to play a role in the results that it had not had in recent years,” he says.
The intention already expressed by Casino to sell its stake in Pão de Açúcar does not alter the company’s strategy in any way, says Pimentel. He guarantees that the adjustments underway in the company are not intended to “dress up the bride” to sell the French partner’s stake at a better price. “My job is to improve the business. If we continue working solely and exclusively on improving the price, we will create a vision of the business that is not necessarily correct,” he says.
Pão de Açúcar’s value proposition, of once again being a “premium merchant”, has been understood by suppliers and customers, says Pimentel. And this is clear in the increase in sales volume, an important metric, considering the moment of food price deflation that has impacted retail. And also for the industry, which once again launched its products in Pão stores.
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The risk right now, he says, is reacting to short-term market pressures and losing focus. This could cause “chicken flights.” “The brand is strong, we have a captive market, there is no reason why our shareholder should not gain value,” he says. “The price of the shares is a consequence of everything that is being done.”
From a capital structure point of view, the company continues to work to find an alternative to sell the remaining stake in Êxito. After the spin-off, Pão de Açúcar retained 13% of the capital of the Colombian chain.
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